Barclays secures Middle East money

Move could see investors from Qatar and Abu Dhabi owning one third of British bank.

31 Oct 2008 14:09 GMT

Barclays is Britain's second biggest bank [EPA]

Qatar stake

Barclays is also raising up to $4.2bn from Qatar's sovereign wealth fund and about $487m from members of Qatar's royal family. That could leave Qatari investors holding up to 15.5 per cent.

The bank's shares initially rose as investors welcomed the bank's ability to raise cash in tough markets and as it said group profit in the first nine months of this year was "slightly ahead" of the same level a year earlier.

Barclays' investor base has been transformed in the past two years, as it has raised funds from investors in China, Singapore and Japan as well as the Middle East, and the bank expects to benefit commercially from the links as well as getting cash.

"There has been a significant shift in the availability of capital and economic power in the world over the last five years and we're ensuring we're aligned with those changes," John Varley, the chief executive of Barclays, said.

Asked whether the bank had enough capital to avoid more fundraising, he said: "Yes, we have what we need."

Bailout rejected

Earlier this month, Barclays had turned down an offer of government funds under Britain's $400bn bailout package, saying it would raise the capital privately.

Rivals Royal Bank of Scotland (RBS), Lloyds TSB and HBOS have agreed to take up to $60bn of taxpayers' funds to help rebuild balance sheets hit by the global credit crisis and prepare for possible recession.

Barclays said when the government's recapitalisation plan was announced that it planned to raise about $10.5bn itself, with almost $4.8bn from the sale of preference shares and the rest from selling ordinary shares.

It had until the end of March to raise the funds.

Barclays has lost billions of pounds from credit-related asset writedowns and is faced with a sharply slowing UK housing market and economy, but it has fared better than many rivals.

The bank expects to gain a competitive advantage by raising capital privately, while RBS and others will have the government as a major shareholder, limiting their room for manoeuvre.